Key to speedier processing of claims and cutting overhead is receiving claims electronically. On average, claims cost $5 to $15 each to process manually and $1 electronically.

Automate (It'll Save at Least $8m a YearAnd Probably a Lot More)

Key to speedier processing of claims and cutting overhead is receiving claims electronically. On average, claims cost $5 to $15 each to process manually and $1 electronically. In other words, Aetna saves at least $4 every time it convinces a provider to file electronically rather than on paper. Aetna receives about 800,000 claims per day, so every 1% increase in electronic filing ought to save upwards of $8 million a year.

The leaders in electronic filing are Blue Cross and Blue Shield. "Aetna is up to about 55% electronic claims," says Mark Anderson, a former hospital CIO who runs an independent healthcare technology analysis business, AC Group, based in Spring, Texas. That's an increase from 45% in 2000, but the "Blues" are both over 85%. The Blues' advantage comes not from technical superiority per se, but because they have adopted the electronic claims format used by Medicare and Medicaid. Today, 95% of doctors are equipped to file their Medicare and Medicaid claims electronically, says Anderson. "Why can't they do it for Aetna? Because Aetna uses a different format."

While doctors could file claims through clearinghouses that translate between formats, most can't be bothered, Anderson says. Instead, they print claims and mail them in, forcing Aetna to process them by hand, the costly way.

Now Aetna is faced with a government mandate to revamp its data systems as part of HIPAA, the Health Insurance Portability and Accountability Act, which dictates a standard format for electronic claims. Compliance efforts cost the company about $13 million pretax last year, with another $20 million in expenses expected in 2002.

Aetna says it is pushing for HIPAA compliance, but it has also requested a one-year extension beyond the Oct. 16 deadline. Aetna says it needs extra time to avoid the expense of modifying systems that it plans to shut down anyway, such as the two older systems for non-HMO claims.

But electronic filing is only part of the answer. Rowe's disclosure last year about duplicate claims payments highlights a more fundamental problem. Aetna never said exactly how much this cost, except millions of dollars a year. "That was probably an impolitic way of describing a problem that every single payer has but they just don't talk about much," says Kevin Hickey, a former Aetna operations executive who now serves as CEO of IntelliClaim, a claims data-cleansing specialist.

Providers who aren't paid the first time often follow up with an amended claim, which an automated system may not recognize as a duplicate. The payer's systems also bundle procedures together and make other changes to the claims data. All of which makes it hard to reconcile claims with payments. "The physicians may not have even realized they got paid twice, depending on how that information goes back to the physician's office," Gartner analyst Cynthia Burghart says.

Bad data has many other consequences. "Any time you fail from autoadjudication to manual, you have an opportunity for an error," says Hickey. Inconsistencyand problemsresult. "What really causes the most concern for providers is when they get paid one way for the same service one day and a different way the next day. When the process is automated, the likelihood that that's going to occur is reduced."

Right now, Aetna is left with a large volume of paper claims, many processed on its behalf by Affiliated Computer Services of Dallas. ACS scans claims, converts them into computer-readable text and then ships the results to an overseas center where workers check the electronic data against the original document. (For a profile of ACS, see p. 50.)

Tom Blodgett, president of ACS's business process solutions, says ACS handles 2 million to 3 million claims per day overall, and expects the demand for this service to continue for years to come. "Yes, the percentage of paper claims is going down. However, the overall volume of paper claims is going up," he says. ACS may not be able to reverse that trend, but it can help lower the cost of processing paper claims by shifting labor-intensive processes to lower-cost countries such as Ghana, Blodgett says.

Through its EPay program, Aetna also can and does entice more providers to do business online by promising payment within 15 days for clean claims, filed electronically. More than half its providers participate. In 2000, it joined with Anthem, Cigna, HealthNet, Oxford Health, PacifiCare, and WellPoint to start MedUnite, which is supposed to provide a set of Web and EDI applications for claims filing, claims status checks, and eligibility verification for multiple payers. But analysts say MedUnite has gotten off to a slow start and hasn't accomplished much, other than to undermine commercial ventures like WebMD that saw themselves playing that role.

Doctors remain dubious about how hard Aetna is trying. Stuart F. Seides, a cardiologist and president of the Medical Society of D.C, says he believes systems used by Aetna and others are rigged against him. Because of the way codes are assigned to different procedures, he says he continually finds himself forced to choose between getting paid quickly and getting full compensation for his services. For example, implanting a coronary stent can be a straightforward procedure that lasts less than an hour, or it can take three hours or more if he encounters complications. But he knows that if he adds a modifier to the claim, rather than sticking with the basic procedure code, "the claim gets kicked out and has to be reviewed manually," he says. So seeking additional compensation for a difficult or extended procedure is "extremely difficult and often futile," Seides says.

This is where systems and legal issues get tangled. Several lawsuits by providers charge Aetna and other insurers with programming their systems to "downcode" claims, resulting in reduced reimbursement. Litigants say this is a conspiracy enabled in part by the payers' use of common systems, such as McKesson's ClaimCheck software. The payers say their systems are simply designed to enforce discounts and other policies that are spelled out in their provider contracts.

In court, Aetna said it used ClaimCheck to spot combinations of procedures that are mutually exclusive, such as a vaginal and abdominal hysterectomy for one patient on the same day. It also blocks separate billing for a procedure that's classified as one part of another (for example, removing an appendix during abdominal surgery).

Ultimately, prompt payment has to be balanced against avoiding claims that are inaccurate, inconsistent with Aetna policies or outright fraudulent. In addition to screening claims with ClaimCheck, Aetna can and does review claims using IBM's Fraud and Abuse Management System, a specialized data mining tool. The tool is designed to comb through millions of claims looking for suspicious patterns. Investigators then can perform a more detailed analysis of claims from a particular provider.